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EU’s Banana Policy Breaks WTO Rules

Jim Prevor’s Perishable Pundit, December 4, 2007

Back in July, we ran a piece entitled Banana Import Policies In Europe Defy Logic And Ultimately Hurt Consumers in which we pointed out:

The whole purpose of the WTO is to say that countries can’t choose favorites. There are exceptions for countries that don’t have normal relations or what we used to call “most-favored-nation” trading status, but, overall, the point of the WTO is that Europe cannot say, in the absence of a free trade agreement, that it favors African producers over South American producers.

Richard Yudin of Fyffes Tropical Produce wrote us here to protest our harsh tone toward those not able to compete in the world banana market as he put it:

The other side of the coin is that the assured markets for their produce allowed many thousands of smallholders in the Caribbean islands to enjoy a steady income and remain in their land.

No other low-tech fruit crop is harvested all year round and this ensures a weekly income to the growers. The preferential treatment for these economically weak nations kept their rural communities economically viable and socially stable.

Well, we have to pay Richard some respect as he was writing from his head and heart; but the interests of Fyffes seem to be different. The WTO has ruled, though not yet published, that the European Union banana importing regime violates WTO rules.

The immediate response in Ireland: Fyffes Shares up 9pc as WTO Rules Against Banana Regime:

SHARES in banana importer Fyffes soared almost 10pc yesterday after news that the World Trade Organisation (WTO) has upheld a complaint from Ecuador challenging European Union rules that impose custom fees of €176 a tonne on bananas from countries outside the Africa-Caribbean-Pacific area.

The news would mean a reduction of more than €30m a year in levy payments by Fyffes, Goodbody analyst Liam Igoe said.

Fyffes shares were up 9c at 93c in Dublin, a rise of 9.4pc on the day.

A preliminary report from the WTO, delivered confidentially to the parties earlier this week, found that the EU importing scheme was inconsistent with global trade rules, the source said.

This latest ruling is the second time in six years that the WTO has found against the EU’s banana imports regime after a ruling against a previous system in 2001.

Ecuador lodged a complaint in November 2006 challenging new rules implemented on January 1, 2006.

The rules imposed custom duties of €176 per tonne on bananas from countries outside the so-called Africa-Caribbean-Pacific (ACP) group.

The United States, home to three of the five biggest multinational banana producers in the world, has also lodged a complaint against the EU system.

Bananas from Latin America account for four fifths of EU imports, with the remainder coming from African, Caribbean and Pacific nations.

ACP bananas enter the EU duty free under a quota of 750,000 tonnes a year, with the system devised to favour the ACP countries, many of which are former European colonies.

Under previous practices, bananas from Latin American and other non-ACP countries were subject to a tariff of €75 a tonne under a certain quota level and €680 a tonne above that level.

This system was redrawn after the WTO in 2001 upheld a complaint against the EU by Ecuador, Guatemala, Honduras, Mexico and the US.

The WTO agreed to rule on the latest US complaint against the EU in July.

The EU described the US action at the time as “regrettable”.

Three of the world’s largest banana producers with plantations in Latin America are US-based multinationals: Chiquita, Del Monte and Dole.

Ecuador, the leading exporter of bananas to the EU, argued that the system was preventing it from maintaining its market share.

It seems unlikely, but we hope that the EU will decide to separate its foreign aid and its trade. Basically, heavy banana consumers should not have to pay what is, in effect, a tax to support banana production in certain countries.

We are sympathetic to Richard’s point, but we think we simply have to find economically viable industries, not subsidize industries that are not competitive.

Easier said than done, of course, but if the amount of time and energy that has been spent on the banana wars had been devoted to helping the banana exporting countries of Africa, the Caribbean and the Pacific, we would be a lot closer to an answer.

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